Paddy Power Betfair PLC (LON:PPB) on Wednesday said its first-half profit rose marginally due to favourable sporting results and the football World Cup but cut its full-year earnings forecast due to the expected headwinds during the remainder of 2018.
The FTSE 100-listed betting group reported underlying earnings (EBITDA) 1% higher at £217mln on revenue up 7% at £867mln for the first six months of 2018 and will pay an interim dividend of 67p a share – up 3% on the same period last year.
The company said it had seen good revenue growth across its divisions in the second quarter, with online and sports revenue up 13% and 12%, respectively.
Revenue in the United States rose a fifth and the company said its strategic partnership in the US with FanDuel – a fantasy sports firm acquired by Paddy Power Betfair in May - would create a unique platform to address the nascent US sports betting market opportunity.
As part of the deal, Fan Duel will work with Boyd Gaming in the US sports betting and online casino markets.
The US Supreme Court in May changed the law that banned sports betting in most of the country, giving states the all-clear to legalise gambling on sports.
The company, created by the 2015 merger of Paddy Power and Betfair, said it could withstand the UK government's plan to cut the minimum bet on fixed-odds betting terminals to £2 from £100 due to the popularity of sports betting in its retail stores.
"Our shops are more profitable, and outperform on sports betting, enabling them to better withstand the impact of lower machine stakes limits," it said.
The company now expects its 2018 underlying earnings, pre-US sports betting, to be between £460mln - £480mln, down from its previous forecast of £470mln - £490mln, reflecting recent trading momentum, the introduction of additional taxes in Australia and the inclusion of losses from the FanDuel business
“We have made substantial progress against our strategic priorities and trading in Q2 was good, with all brands and operating divisions contributing to the Group's double-digit revenue growth,” said Paddy Power Betfair’s CEO Peter Jackson.
“We now have much better visibility of the regulatory and fiscal changes in the UK, Australia and the USA, and believe that our scale, leading customer propositions and strong balance sheet mean we are well positioned to build a business that can generate sustainable shareholder returns over the long term."
Analysts at Shore Capital said that with some £125mln of headwinds expected between 2017 and 2020, they see “limited profit progression” over the next three years. As such, the broker retained its 'sell' stance on the company.
Shares in Paddy Power Betfair were 5.4% at 7.685p in afternoon trading.
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